Monthly Archives: July 2016

A few days ago the trash collector came along on his usual route. Typically, one person would drive while the other collected the trash bins and moved them to an automatic lift that dumped them into the truck. Afterwards, the same trash collector would deposit the empty bins on the driveway where they were originally. But this time was different. The driver pulled up with what looked like a dumpster attached in front of the cab. Two prongs emerged from below the dumpster and hoisted each trash bin, dumping it into the dumpster, emptying it and replacing it on the driveway. When the dumpster was full, it was lifted, dumped into the truck and compacted. In short, in one week, the employment at that trash collection company was cut by roughly 50%. One person could now do the work of two.

Of course, what I just described has been going one for quite some time. In the early 19th century, Ned Ludd led English workers in destroying mechanized stocking frames, spinning frames and power looms in an effort to protect their jobs from automation. The British government arrested the instigators and charged them with a variety of crimes in mass trials. As we can now attest with 20/20 hindsight, the machines led to the rise of the British textile industry and created more jobs than they destroyed. Eventually, they made Britain the world leader in industrialization.

More recently, with the rise of information technologies and new forms of automation, we have seen other sorts of jobs disappear. Secretaries, typists, stenographers, statistical clerks, parking lot attendants, assembly line workers, miners and typesetters have all but disappeared. Initially, economists assured us that although there would be a period of adjustment, ultimately new sorts of jobs would emerge that would replace those lost through technological change. Yet, of late that does not appear to have happened. At one time it was relatively easy to switch from one job to another (although those who had to do so have hardly enjoyed the process). In the past, the skills required for new jobs to replace those eliminated by virtue of technological change could be acquired quickly. But in today’s society, where ever more complex technologies have become commonplace, re-employment has become more problematic for those lacking the requisite skills and education to find jobs.

Further changes are likely to take place. Self-driving vehicles will soon replace most taxi drivers, long distance truckers, farmworkers and others engaged in transport industries. Many food processing plants are nearly fully automated. Supermarkets have automated checkouts eliminating many cashiers’ jobs. As many or more people work in their offices or at home now as those who work on shop floor. Robots of all kinds are being enthusiastically adopted throughout the industrial and even the service sector. Even China, with its relatively low wages, is now putting more robots to use than the United States. The creation of the so-called ‘internet of things’ will likely bring yet another new wave of innovation and job loss.

The prevailing wisdom is that employers will only replace workers with robots if robots are cheaper to ‘employ’ than workers. But unlike employees, robots do not go on strike. They do not require health or retirement benefits. They don’t need to be tied to 40 hour weeks. In some cases, robots can work 24/7/365 with only occasional down time for servicing. And, as artificial intelligence advances, robots can even be taught to do complex tasks. Hence, the choice between workers and machines is more than just a question of wages and benefits.

At the same time, both the length of the work week and of the work year has remained largely unchanged. In the 19th century, it was common for the work week to be as long as 60 hours. Yet, the standard work week was fixed at 40 hours with the passage of the Fair Labor Standards Act of 1938. However, over the last 30 years or so, it has remained stable at that level. In contrast, both economist John Maynard Keynes and President Richard Nixon were convinced that the downward trend begun early in the 20th century would continue such that by the end of the last century hardly any work would be required at all. And, especially for those in managerial positions, there is some evidence to suggest that 40 hours is a gross underestimation of the working time required and expected by upper management.

We find the same with respect to the work year. Employed Americans worked some 1758 hours per year in 2011, while German workers worked only 1411 hours per year. Put differently, American workers work about two months more per year than do German workers! We get fewer vacation and sick days as well. Yet, evidence from around the world suggests that American workers are lessproductive per hour of work than are those in other industrialized nations.

At the same time, most Americans have seen static wages, boring work and growing inequalities. Since the 1970s, workers – especially those at the bottom of the wage ladder – have seen virtually no change in their real wages, i.e., wages after inflation. Moreover, a 2013 Gallup poll found that about 70% of American workers are disengaged from their work, i.e., they do what is necessary to get by and no more. Gallup estimated that active disengagement costs the US economy some $450-550 billion per year. Not surprisingly, service workers, those who directly serve customers, are the least engaged (and, in general, the most poorly paid). Evidence from other industrialized nations suggests that shorter hours and working ‘smarter’ instead of longer would improve this situation considerably. For a nice visual summary, click here.

In addition, even as workers have seen their wages stagnate, labor force participation has declined. Put differently, many workers laid off during the Great Recession have simply given up looking for work. At the same time, income and wealth inequality have grown to levels not seen since the Roaring Twenties. Those in the top 1% have seen their incomes rise substantially, while those in the top 0.1% have seen their incomes skyrocket. It is no wonder that so many Americans are fed up with politics as usual.

Numerous explanations and alleged cures have been put forth. These range from raising the minimum wage to pulling out of the global economy by closing our borders to various imports. They involve a variety of approaches to reorganizing the tax system. The proposed solutions are always focused on creating more and better paid jobs. But all fail to put this in the light of automation.

So, to place the matter in clear relief: In the face of greater and greater automation of work, politicians and pundits from left to right see the solution to our problems in the enactment of policies that (we are told) will lead to the creation of more jobs. But there is another option, one that involves facing up to the problem of automation. That is what is sometimes called a Basic Income Guarantee or BIG. Curiously, its advocates cut across the political spectrum.

The idea of a BIG has been around for several centuries. Indeed, American patriot Thomas Paine advocated it more than 200 years ago. It involves providing a fixed payment (perhaps adjusted for inflation) to every American that would allow them to live modestly but comfortably without worrying about where their next meal might come from. Unlike current welfare payments that would be largely replaced by it, the BIG would be a benefit to everyone who was an American citizen. It would come with no strings attached – no requirements as to how it would be used, who would be eligible, no means tests.

This would ensure that everyone had the means to live securely, without fear of losing food, clothing, shelter or health care when a job was not available. While a few persons might choose to live solely on the BIG, evidence from small scale experiments around the world suggests that the vast majority would continue to work although they might be motivated to push for better, more meaningful, more engaging work. Such a BIG would doubtless lead to a rise in wages (and perhaps to a reduction in hours) for those at the bottom of the economic ladder. That, in turn, could well promote more rapid automation by employers. It would also give everyone, especially those at the bottom of the economic ladder, an opportunity to gain more education, to engage in entrepreneurial activities, to engage in craft work that might be unprofitable, but at the same time very rewarding in non-economic ways. In short, it would allow the ‘pursuit of happiness’ to all Americans.

Of course, the first question that objectors will ask is: How in the world would we pay for all this? But perhaps that is not as difficult as one might imagine. First, the vast majority of welfare programs would be dismantled. There would be no need for food stamps, for special health programs for the poor and dozens of other welfare programs. And, of course, not only the direct payments but all the local, state and federal bureaucracies associated with these programs would be eliminated. What would need to be maintained — and perhaps improved — would be mental health services, anti-addiction programs and the like.

Second, we could actually collect the taxes that are due to the Internal Revenue Service. At the moment, the IRS is hardly the most adored of federal agencies. But this is due in large part to the fact that it is grossly underfunded. Each year, it fails to collect billions of dollars in taxes simply because of a lack of sufficient staff. And, because of understaffing it often gives out erroneous advice. Much of that could be resolved by simplifying the absurdly complex tax code and by policing the very wealthy who hide their earnings and wealth in all sorts of special provisions of the code.

Third, we could raise the tax rates on the very wealthy. As I explain in my book, Real Myths = False Truths: Securing America’s Future, despite the elegant figures in elementary economics textbooks, all markets are to some extent ‘rigged.’ That is, myriad aspects of the design of every market make it easier (or harder) for some participants to benefit from market transactions. And, the markets that are closest to the textbook model — think of the stock market — are hardly ‘free.’ They require the most complex bureaucracies.

Fourth, there is a good chance that a BIG would partially pay for itself. It would do this by opening opportunities for creativity in the sciences, engineering, good old-fashioned tinkering, civic engagement as well as the arts and the humanities. It would also make it necessary for employers to make workplaces more attractive, more pleasant and creative places to work if they were to keep their employees. That, in turn, would likely increase productivity. In other words, a BIG would gradually create new sources of income and wealth.

Perhaps the biggest stumbling block in implementing a BIG is the Calvinist tradition that we have inherited. We have all been taught to believe in the myth that we must define ourselves through our work. When we meet people we do not know, often the first question we ask is what they do. We want to know where they fit in the occupational hierarchy. For most of us the religious justification for working — to demonstrate that we are among God’s chosen — has long since evaporated. But the urge to work and separate work from play, from recreation remains with us. We need to get beyond that. We need to recognize that we have largely succeeded in creating the conditions for comfortable, enjoyable, meaningful lives. What we need to do is to put that success into practice.

In sum, a Basic Income Guarantee would have a long-term transformative effect on American society. It would eliminate many inequalities. It would open new paths to personal and social development. It would provide new sources of freedom to each of us. It is long overdue.